Why the $1M ‘AGT’ prize is not what it seems
TORONTO — Every week on the summer competition series America’s Got Talent, host Nick Cannon and celebrity judges Howard Stern, Heidi Klum, Mel B and Howie Mandel make repeated mentions of the $1 million grand prize.
But only viewers who stay tuned to the last seconds of the closing credits know that the winner of AGT doesn’t actually become an instant millionaire.
A disclaimer explains: “The prize, which totals $1,000,000, is payable in a financial annuity over forty years, or the contestant may choose to receive the present cash value of such annuity.”
Eric Kirzner of the Joseph L. Rotman School of Management at the University of Toronto says AGT should be more transparent.
“They’re giving you $25,000 a year for 40 years,” he explains. In the U.S., this income is taxable, so the final amount collected would be less than $1 million.
If the winner chooses instead to take the present cash value of the annuity, Kirzner figures he or she would get about $430,000 (based on a fixed rate of 5 per cent), less state and federal taxes.
According to Reality Blurred, AGT‘s Season 5 winner Michael Grimm took home a little more than $200,000 after choosing the lump sum option.
Season 2 winner, ventriloquist Terry Fater, signed a five-year $100 million contract in 2008 to perform at The Mirage in Las Vegas. But other AGT winners haven’t found the same good fortune (just ask Bianca Ryan, Neal E. Boyd, Kevin Skinner or Landau Eugene Murphy).
On the only season of Canada’s Got Talent in 2012, dance troupe Sagkeeng’s Finest won $100,000 and a new car.
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